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STATE OF OKLAHOMA
2nd Session of the 58th Legislature (2022)
COMMITTEE SUBSTITUTE
FOR ENGROSSED
HOUSE BILL 1058 By: Boles of the House
and
Taylor and Hall of the
Senate
COMMITTEE SUBSTITUTE
An Act relating to cities and towns; pr oviding short
title; amending 11 O.S. 2021, Section 17 -105, which
relates to annual audits of municipalities;
increasing municipal income threshold for required
annual or biennial audits to be conducted; modify ing
manner in which threshold is calculated; m odifying
statutory references; defining scope of biennial
audit; deleting certain required procedures;
authorizing the use of alternate auditing procedure;
directing development of alternate auditing procedure
in collaboration with certain entities; providing
time limitation for use of alternate auditing
procedure; providing that act shall sunset by
operation of law unless certain conditions have been
met; requiring alternate auditing procedure to meet
certain attestation standards; extending time for
filing of audit; providing for additional extension
of time under certain conditions; including and
excluding income from certain trusts in calculating
municipal income; amending 11 O.S. 2021, Section 17-
107, which relates to the failure to file an audit;
specifying condition under which withholding of
certain gasoline taxes shall cease; requiring certain
withheld funds to be deposited in certain revolving
fund; creating the Special Investigative Unit
Auditing Revolving Fund; making fund continuing and
nonfiscal; stating sources of revenue; stating
purpose of fund; establishing procedures of
expenditures of monies accruing to the credit of the
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fund; repealing 11 O.S. 20 21, Section 17-108, which
relates to municipal trust exemptions; providing for
noncodification; providing for codification;
providing an effective date; and declaring an
emergency.
BE IT ENACTED BY THE PE OPLE OF THE STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section of law not to be
codified in the Oklahoma Stat utes reads as follows:
This act shall be known and may be cited as the "Municipal Audit
Reform Act of 2022".
SECTION 2. AMENDATORY 11 O.S. 20 21, Section 17-105, is
amended to read as follows:
Section 17-105. A. The governing bod y of each municipality
with an income of Twenty-five Thousand Dollars ($25,000. 00) Fifty
Thousand Dollars ($50,000.00) or more to its general fund in total
revenue to all funds including component units of which the
municipality is a be neficiary, during a fiscal year shall cause to
be prepared, by an independent licensed public accountant or a
certified public accountant, an annual financial statement audit to
be conducted in accordance with auditing standards generally
accepted in the United States of Amer ica and “Government Auditing
Standards” as issued by the Comptroller General of the United
States. Such audit shall be ordered within thirty (30) days of the
close of each fiscal year. Copies shall be filed with the State
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Auditor and Inspector within six (6) months after the close of the
fiscal year in accordance with the provisions of Sections 3022 and
3023 of this act Title 68 of the Oklahoma Statutes and with the
governing body of the municipality.
B. The governing body of each muni cipality with an income of
Twenty-five Thousand Dollars ($25,000. 00) Fifty Thousand Dollars
($50,000.00) or more to its general fund during a fiscal year in
total revenue to all funds including component units of which the
municipality is a beneficiary, and with a population of less than
two thousand five hundred (2,50 0) as of the most recent Federal
Decennial Census, and for whom an annual financial statement audit
is not required by another law, regulation or contract, shall cause
to be prepared, by an i ndependent licensed public accountant or a
certified public accou ntant, an annual a biennial financial
statement audit in accordance with auditing standards generally
accepted in the United States and Government Auditing Standards as
issued by the Comptrol ler General of the U nited States, or an
agreed-upon-procedures engagement over certain financial information
and compliance requirements to be performed in accordance with the
applicable attestation standards of The American Institute of
Certified Public Accountants. The spe cific procedures to be
performed are as follows for the fiscal year:
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1. Prepare a schedule of changes in fund balances for each fund
and determine compliance wit h the statutory prohibition of creating
fund balance deficits;
2. Prepare a budget and actual financial schedule for the
General Fund and any other significant funds listing separately each
federal fund and determine compliance with the legal level of
appropriations by comparing expenditures and encumbrances to
authorized appropriations;
3. Agree material bank account balances to bank statements, and
trace significant reconciling items to subsequent clearance;
4. Compare uninsured deposits to fair value of pledged
collateral;
5. Compare use of material -restricted revenues and resources to
their restrictions;
6. Determine compliance with requirements for separate funds;
and
7. Determine compliance with reserve account and debt service
coverage requirements of bond indentures. Each biennial audit sha ll
cover the two (2) preceding years.
The governing body of each municipality may alternatively
request a biennial agreed -upon-procedures engagement to be
prescribed by the State Auditor and Inspector, developed in
collaboration with a r epresentative from a statewide organization
that has represented municipal governments for at least fifty (50)
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years, a representative from an organization that advises or trains
municipal clerks and treasurers, and a certified public accountan t.
Each biennial agreed -upon-procedures engagement shall cover the two
(2) preceding years.
For engagements performed for the fiscal year ending June 30,
2023, the prescribed procedures developed under the terms of this
subsection will be utilized on a on e-year basis ending June 30,
2024. The procedures shall then be submitted to the Legislature for
ratification. If the rules are not ratified by the Legisla ture on
or before December 31, 2023, the Municipal Audit Reform Act of 2022
shall sunset and be repealed as a matter of law. Agreed-upon
procedures required under this act sha ll be performed in accordance
with the applicable attestation standards of The A merican Institute
of Certified Public Accountants.
Such The audit or agreed-upon-procedures engagement shall be
ordered within thirty (30) days o f the close of each the fiscal year
that the audit is due . Copies shall be filed with the State Auditor
and Inspector within six (6) nine (9) months after the close of the
fiscal year in accordance with the provisions of Sections 3022 and
3023 paragraph 2 of subsection A of Section 212 A of Title 68 74 of
the Oklahoma Statutes and with the governing body of the
municipality., with the deadline to order and file the audit or
agreed-upon procedures eligible for extension by the State Auditor
for special circumstances or emergencies.
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C. The municipal income requirements in su bsections A and B of
this section shall not include any grant monies provided to a
municipality from any federal, state, or other gover nmental entity.
The municipal income requirements shall not include income of any
public trust established under Section s 176 through 180.4 of Title
60 of the Oklahoma Statutes with a municipality as the be neficiary
of the trust; provided, income from trusts established principally
for the purpose of operating electric, water, wastewater , and
sanitation utilities shall be i ncluded for purposes of the municipal
income requirements.
SECTION 3. AMENDATORY 11 O.S. 20 21, Section 17-107, is
amended to read as follows:
Section 17-107. If a municipality does not file a copy of its
audit or agreed-upon-procedures report as provided in Section 17-105
of this title, the State Auditor and Inspector shall notify the
Oklahoma Tax Commission which shall withhold from the municipality
its monthly allocations of gasoline taxes un til notified by the
Office of the State Auditor and Inspector that the audit report is
has been filed. If a report is not filed within two (2) years after
the close of the fisc al year in the case of an annual audit, or the
second fiscal year of a biennial audit period, the funds being
withheld shall be remitt ed by the Oklahoma Tax Commission to the
county in which the incorporated city or town is located and
deposited to the cou nty highway fund of that county to be used as
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otherwise provided by law Special Investigative Unit Auditing
Revolving Fund created pursuant to Section 4 of this act.
SECTION 4. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 17-107A of Title 11, unless
there is created a duplica tion in numbering, reads as follows:
There is hereby created in the State Treasury a revolving fund
for the State Auditor and Inspector to be designated the “Special
Investigative Unit Auditing Revolving Fund ”. The fund shall be a
continuing fund, not sub ject to fiscal year limitations, and shall
consist of all monies received by the State Auditor and Inspector
from funds withheld from a municipality ’s allocations of gasoline
taxes as provided in Section 17-107 of Title 11 of the Oklahoma
Statutes and all monies received from legislative appropriations for
the purpose of conducting investigative municipal audits. All
monies accruing to the credit of such fund are hereby appropriated
and may be budgeted and expended by the State Auditor an d Inspector
for the purpose of offsetting expenses incurred from speci al
investigative audit activities relating to municipal government.
Expenditures from the fund shall be made upon warrants issued by the
State Treasurer against claims filed as prescri bed by law with the
Director of the Office of Management and Enterpris e Services for
approval and payment.
SECTION 5. REPEALER 11 O.S. 20 21, Section 17-108, is
hereby repealed.
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SECTION 6. This act shall become effec tive July 1, 2022.
SECTION 7. It being immediately ne cessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and a fter its passage and approval.
58-2-3774 KR 4/13/2022 2:35:36 PM